Mining in Indonesia includes a part or all stages of coal and mineral exploration and exploitation. Minerals are defined by law number 4 of 2009 on Mineral and Coal Mining (“Mining Law”) as inorganic compounds which possess specific characteristics and compositions in the form of ores. Coal is defined as sediment of organic carbon which is naturally formed from plants. Mining in Indonesia does not include any activities related to exploration and exploitation of geothermal, oil and gas and ground water.

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Growth of the manufacturing industry in Indonesia is expected to be significantly weaker in 2015 than initially forecast. Indonesia’s Industry Ministry cut its 2015 forecast for expansion of the country’s manufacturing industry to 6.1 percent (year-on-year) from the previous estimate of 6.8 percent. In tandem with slowing economic growth in Southeast Asia’s largest economy, manufacturing growth has slowed to 4.99 percent (y/y) in Q3-2014. Moreover, the HSBC/Markit PMI contracted to a record low of 48.0 in November 2014.

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The obligation for foreign companies to perform a divestment of part their shares to Indonesian companies has raised already much discussion among foreign investors. Before the enactment of BKPM regulation number 5/2013 on Guidelines and Procedures on Licensing and Non-licensing of Capital Investment as amended by BPKM regulation number 12/2013 (BKPM Regulation), divestment was required for all foreign companies (PMA) in Indonesia. The new regime of the BKPM Regulation removes this obligation, even though there are still sectors in Indonesia which require foreign companies to divest, such as the mining sector.

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In late September, the Minister of Public Works (Minister) issued Minister Regulation number 10/PRT/M/2014 regarding Guideline Requirements for Giving Permission Foreign Construction Service Representative Office (New Regulation). The New Regulation for construction representative offices in Indonesia replaces the old Minister regulation 05/PRT/M/2011 (Old Regulation) which had a similar title. The New Regulation has become more comprehensive than the Old Regulation and in this column we will discuss the most significant changes for foreign investors.

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